The most important thing to remember is that all income earned from renting out all or part of a property needs to be declared. It doesn’t matter if it’s only for one week of the year, or a few weeks here and there, every dollar needs to be declared
The ATO collects information from a range of sources, including banks, other government agencies and suppliers and other third parties. We also get information about purchases of major items, such as cars and real property, and have the ability to compare this information against income and expenditure that taxpayers report to us.
The ATO have also advised they are currently working with third parties in the accommodation sharing sector to provide greater visibility around these issues and to assist us in compliance activities.
Be aware of the Capital Gains Tax implications
Just like running a business from home, once income is earned from a primary place of residence there are Capital Gains Tax (CGT) implications. It is possible that if a property significantly increases in value, the amount of CGT owed may even be higher than the amount of income received.
The ATO encourages anyone considering renting out part or all of their primary residence to seek independent advice about the tax implications. Good record keeping will also assist in calculating the capital gain when the property is sold.
Only claim deductions you are entitled to
Deductions can be claimed against income earned through accommodation sharing, however it is essential that you keep good records and apportion expenses appropriately. You can only claim deductions that relate to the portion of the house which is rented out, and only for the length of time it is rented.
Don’t Try and Hide your income
If you’re using Airbnb/Stayz it’s out there for everyone to see. The ATO can track this income easily, so even if you’re not earning a lot of money, keep your records and be honest about the income you’ve generated from the property. Airbnb tax is a real thing!
The ATO is not “laid-back” about people who under-claim rental income and it can lead to back taxes owing plus new fines, penalties and interest charges.
In summary, if you aim to host a room or rent your property:
- understand the tax implications of being a Host
- don’t hide or under-claim your Airbnb income; the ATO can spot your Airbnb income from a mile away,
- save your expense receipts and notes